Disclaimer: This article was written by EquityMultiple and edited by the Millionacres team. The survey research represented in the article was conducted by EquityMultiple. The opinions reflected in this article are entirely of EquityMultiple.
The real estate crowdfunding ecosystem has evolved rapidly in the past decade, following the JOBS Act, the landmark legislation that opened the door for investing platforms to offer passive, fractional real estate investments to accredited individuals. The young industry was born into the longest period of economic growth in the nation’s history, following the credit crunch and investor trepidation of the post-Great Recession years. Between 2015 and 2020, the industry matured rapidly, with a handful of platforms emerging as market leaders and crossing the $100M assets-under-management milepost. Skeptics wondered whether the industry was a top-of-the-market mirage and if the model would prove unsustainable if macroeconomic conditions took a turn for the worse.
The outbreak of a global pandemic has presented the real estate crowdfunding industry a trial by fire. While the economic realities of the past year have challenged real estate crowdfunding platforms, the industry appears to be on solid footing. Many self-directed investors now seek greater diversification and exposure to illiquid assets as we enter a recovery phase that may be characterized by greater volatility, inflation, and elusive yield in a low-interest rate environment. This trend is evident in the transaction volumes of leading real estate platforms in Q4 of 2020 and Q1 of 2021, following the mid-2020 nadir of commercial real estate markets. This whitepaper also shows, through survey data, that accredited investors remain enthusiastic about the types of CRE assets offered through online real estate investing platforms.
Methodology: this survey, conducted in March, 2021, aggregates the preferences and perspectives of hundreds of accredited investors across the nation who have participated in the real estate crowdfunding space.
- Investors are more intent on investing in real estate going forward than they were prior to the pandemic.
- Among commercial real estate asset classes, investors are overwhelmingly focused on multifamily, last-mile industrial, and niche asset classes like self-storage, indicating a preference for recession-resistant assets.
- Real estate crowdfunding is now overwhelmingly the preferred channel for real estate investing among this cohort of self-directed investors.
What investors want from real estate crowdfunding platforms
Payment priority vs. upside
The majority of investors surveyed had unchanged attitudes toward the degree of payment priority (downside protection) and upside potential of real estate crowdfunding investments: 66% of investors stated the same demand for payment priority pre- and post-pandemic, and 75% of investors stated the same demand for upside potential pre- and post-pandemic.
30% of investors surveyed stated that payment priority is now more important going forward, as compared with only 4% who stated payment priority is now less important to them.
18% of investors surveyed stated that upside potential is now more important going forward, as compared with only 8% who stated that upside potential is now less important to them.